K. Hovnanian defaults on 8% notes due 2019 due to unpaid coupon

By Marisa Wong

Morgantown, W.Va., May 1 – An event of default may occur under the 8% senior notes due 2019 issued by Hovnanian Enterprises, Inc.’s wholly owned subsidiary, K. Hovnanian Enterprises, Inc., due to non-payment of interest on a portion of the notes, according to an 8-K filing with the Securities and Exchange Commission.

Hovnanian wholly owned subsidiary K. Hovnanian at Sunrise Trail III, LLC owns $26 million of the 8% notes that were acquired through an exchange offer completed on Feb. 1.

Covenants under K. Hovnanian’s 13˝% senior notes due 2026 and 5% senior notes due 2040 prohibit K. Hovnanian from making interest payments on the notes held by affiliate Sunrise Trail.

As a result, even though the issuer made the regularly scheduled interest payment due May 1 on all 8% notes other than the affiliate-held notes and intends to continue making interest payments on those other notes, the issuer did not make the $1.04 million interest payment due on the affiliate-held notes.

The non-payment of interest, which has not been waived by Sunrise Trail, constitutes a default under the indenture governing the 8% notes and will constitute an event of default if the interest payment is not made within the 30-day grace period.

Hovnanian is a Matawan, N.J. homebuilder.

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